How a company should protect its trade secrets

In a globalised economy, the capacity for independent innovation and core technology are the important marks of a company's competitive strength and capacity to develop. What protective measure to take for a core technical solution, so that it better serves competition in the market and realises the technical value of the solution, is an important choice a company faces; this article discusses patent protection and trade secret protection.

A company's commercial information generally falls into three kinds. First, information that is not an object of protection under the Patent Law and can therefore be protected only as a trade secret, which includes business information such as customer lists and management techniques. Second, information that is a patentable object but, because the technology of the product or process is not sufficiently advanced, does not meet the requirements of novelty and inventiveness and so cannot be granted a patent; many small and medium enterprises, or enterprises at the start-up stage, are limited in staff and equipment, and their products and technical solutions are not yet mature enough, so that they fall into this class. Third, inventions or utility models that meet the requirements of patentability and may be protected by patent: such information may be patented and a patent right obtained, or it may be kept from the public as a trade secret. When a company may choose, then, how is the most suitable measure to be determined?

The characteristics of patent protection and of trade secret protection

The comparison makes it easy to see that a trade secret imposes lower demands on the technology and keeps it more secret, but that the risk and the cost are also higher. To choose a protective scheme for different kinds of technical secret, a company therefore needs to classify them by such factors as the market benefit of the technology and how advanced it is, and to choose the method suited to its own technical characteristics.

1. How advanced the technology is

Where the technical difficulty is considerable, and the market cannot independently develop technology of the same or a similar level for some time, a company would do well to use a trade secret to prevent the information from being disclosed in whole or in part, and so to prevent competitors from obtaining the technical solution. Or where the technical information a company holds has a short economic life and will bring it income only for a short time, it should be protected as a trade secret rather than patented: patent application is a cumbersome procedure with a high cost in time, and the technology may well be displaced by the market and lose its commercial value while the application is pending, while the company must afterwards pay the costs of maintaining the patent right.

2. Market benefit

For technology that can produce a long-term market benefit, a company may fix the ownership of the right by patent, so that it enjoys stable and lasting protection and can create economic value through use, licensing and the like. Where such technology is also highly innovative and hard to copy, it may be protected by combining patent and trade secret: in the patent application, disclose only the technical features necessary to solve the technical problem, which ensures that the solution is sufficiently disclosed and the conditions for grant are met, while protecting as a trade secret the company's core improvements and the information that makes the technology work better. In this way the technical information is fixed by the patent right and given a positive and certain protection, while the company keeps its core competitiveness and its advantage in the market.

In choosing the strategy for a patent application, whether to seek a utility model or an invention is the key to whether the technology can obtain a patent right. Where a company needs a patent right quickly but also wants the greater substance of an invention patent, it may file both applications at once; once the utility model is granted, if the conditions for grant of an invention patent are met, the company may obtain the invention patent by abandoning the utility model right.

Suggested protective measures

A company should take protective measures from the development stage, assessing the type and characteristics of the technology and deciding the specific method of protection; it should apply appropriate internal confidentiality measures at the outset of research and development, forming a closed loop with the later long-term protection, whether by trade secret or by patent, and so avoid losing the basis of the right through early disclosure of information.

From the standpoint of management, technical, managerial and legal staff need to work together, serving the technical information through staff training, a sound confidentiality system, an audit system and a mechanism for enforcing rights.